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M/s. Shanti Enterprises Versus ITO, Ward-2, Kakinada

2017 (9) TMI 819 - ITAT VISAKHAPATNAM

Valuation determined by DVO - CIT(A) confirming the addition by not allowing the deduction of 15% from cost of construction by following the CPWD method and 10% on self-supervision - Held that:- As gone through the DVO report and also the assessment order and found that the DVO by considering the time and place of construction and also rates approved by the CBDT, cost of construction is estimated. Find no infirmity in the order passed by the Ld. CIT(A). - So far as self-supervision is concer .....

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allowance is required on account of self-supervision. By taking into consideration all find no infirmity in the order passed by the Ld. CIT(A). Thus, this appeal filed by the assessee is dismissed. - I.T.A. No. 496/Vizag/2016 - Dated:- 13-9-2017 - SHRI V. DURGA RAO, JUDICIAL MEMBER For The Appellant : Shri P. Prabhakara Murthy, AR For The Respondent : Shri K.C. Das, DR ORDER PER V. DURGA RAO, Judicial Member: This appeal filed by the assessee is directed against order of the CIT(A)-2, Visakhapat .....

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of appellant's case, the very reference of Cost of Construction to DVO, is not correct and as such the very addition relying on report thus obtained is un called for and liable to be deleted. 3. The Learned Commissioner of Income-Tax(Appeals)-2, is not at all justified in sustaining addition of ₹ 36,63,299/- relying on DVO report by adopting plinth area rates and cost index method issued by CPWD approved by CBDT, which is mere opinion, as against cost of construction recorded in the re .....

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which were accepted by department itself. 4.1 In the facts and circumstances of appellant's case, the Learned Commissioner of Income Tax (Appeals)-2, Visakhapatnam should have allowed rebate towards self super vision charges @ 10% to 12.5% as against 7.5% allowed by DVO. 4.2 In the light of the above, the Learned Commissioner of Income- Tax(Appeals)-2, ought to have properly appreciated, the appellant's working of % of Difference between cost adopted by DVO and cost as per books of acco .....

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. For these grounds and any other ground or grounds that may be urged during the course of hearing of the appeal, the appellant humbly prays the Hon'ble Income Tax Appellate Tribunal to allow the appeal or to give appropriate relief as the Hon'ble Tribunal may deem it fit, in the facts and circumstances of appellant's case. 3. The assessee has raised as many as grounds. However, the issue for consideration is whether the Ld. CIT(A) is correct in confirming the addition of ₹ 36, .....

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per Speciality Hospital and Sarvani ENT Hospital. With regard to 7 Star Super Speciality Hospital, the Managing Partner in his statement recorded on 19.8.2014 subsequent to the survey admitted an additional amount of ₹ 48 lakhs for the assessment year 2012-13 towards cost of construction of the said hospital as the assessee was not able to produce certain vouchers relating to labour and material such as sand, bricks, etc. Subsequently, the A.O. referred the property for valuation. The DVO .....

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on officer i.e. DVO has adopted CPWD rates and has allowed only 7.5% towards self-supervision, however there are various judicial decisions allowing 20% towards the rate difference and 12.5% towards self-supervision. If that is considered there will not be any difference. In the assessment order, the A.O. has noted that the assessee categorically admitted voluntarily in his statement u/s 131 of the Act about its inability to produce the bills and vouchers with reference to certain expenses such .....

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ctural/working drawings of the building to determine the quantities of the items provided in the building would not be submitted by the assessee, hence, the valuation officer adopted the plinth area rate and cost index method. Thus, the A.O. noted that it is very much evident that there were discrepancies in the maintenance of vouchers, therefore, there is no valid basis for the assessee to retract from the disclosure made. Besides the A.O. has noted that the valuation officer had adopted the ra .....

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f ₹ 54,51,619/- was added to the total income of the assessee. 5. On appeal before the CIT(A), it was submitted that the A.O. should have been allowed 15% deduction because the valuation officer adopted the CPWD rates and he further raised that A.O. should have given self-supervision rebate to the extent of 10% to 12% and submitted that same may be allowed. The CIT(A) after considering the explanation of the assessee so far as adoption of CPWD rates are concerned, he has observed as under: .....

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So far as self-supervision charges are concerned, the Ld. CIT(A) has held as under: As regards the plea towards self-supervision, I find that the DVO has allowed rebate at 7.5% of an amount of ₹ 15,88,392/-. However the AO did not allow such relief taking into account the professional preoccupation of the partners and consequent want of self-supervision. However, it is relevant to note that this rebate is allowed towards probable savings in engaging labour and procuring material directly r .....

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fore, 15% allowance should be given to the assessee. He further argued that the Ld. CIT(A) has only allowed deduction for self-supervision at 7.5% and it can be allowed up to 12%. 9. On the other hand, the Ld. D.R. strongly supported the order passed by the authorities below. 10. I have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The issue for consideration before me is the cost of construction of hospitals. The assessee .....

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The DVO has adopted the rates approved by CBDT by taking into account cost indexation of time and place and determined the cost of construction at ₹ 2,56,24,000/- after giving allowance towards self-supervision of ₹ 15,88,392/-. The A.O. has called the assessee s objections as to why valuation determined by DVO should not be adopted. In response to that, the assessee has submitted before the A.O. that the DVO has followed the CPWD rates and has also allowed only 7.5% towards the sel .....

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